Tuesday, March 26, 2013

Omnishambles Wednesday ! Will Bersani form a grand Coalition with Silvio ? And what is the view from Germany concerning the events of the past couple of weeks in Cyprus and elsewhere ? As Cyprus twists in the wind , Spain bastes in scandal juices......


http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_26/03/2013_489977

Cyprus: The eurozone's omnishambles moment

By Nick Malkoutzis
At the beginning of last week, Cypriot politicians insisted they would not choose a “suicidal” option for their country. By the end of the week, they picked one that would inflict mortal wounds instead.

Nicosia’s handling of its unprecedented predicament has been cataclysmic. But the approach adopted by the European Union and International Monetary Fund to Cyprus’s problems has also been disastrous. The eurozone has been building up to an omnishambles moment throughout the debt crisis and it finally struck in a small island state in the Eastern Mediterranean.

The agreement arrived at in Brussels early Monday, following hours of talks involving Cypriot officials, eurozone finance ministers and EU and IMF chiefs, is being billed as the least worst option after all sides took successive wrong turns on the way. That may be the case but it will be little consolation to thousands of Cypriots who have lost a big chunk of their deposits and face uncertain times ahead.

For those looking at the longer-term picture, the island is in for years of extreme difficulties. Its banking system and concomitant services made up about half of the island’s economy. This has now been obliterated. Depositors are unlikely to trust Cypriot banks for some time to come and young Cypriots will have to choose to become something other than lawyers, financiers and accountants. Many will have to consider a future away from their homeland, which faces a double-digit recession in 2013 and more years of economic contraction ahead.

A large part of Cyprus’s downfall is of its own making. Having decided to make banking one of the main pillars of its economy, along with tourism and shipping, Cyprus should have done everything in its powers to protect its right to make a living from a much larger than average financial sector, just as Luxembourg and other countries do. Instead, it became acutely exposed to the failing Greek economy through nonperforming loans and Greek bonds shorn in last year’s PSI. It also allowed others to question the legitimacy of some of the money that was entering the island’s bank accounts.

The Cypriot political and banking leadership ignored for months the fact that the island’s second-largest lender, Cyprus Popular Bank (Laiki), was no longer a viable concern, especially after its suffered combined losses of about 4 billion euros with Bank of Cyprus when their Greek bond holdings were restructured in February 2012. An IMF country report in November 2011 outlined concerns about Cyprus’s banking system, particularly due to its exposure to the Greek economy, and recommended that “authorities should require banks to put in place robust plans to achieve higher capital ratios... and... move quickly to enhance their powers so that they can take prompt corrective action to recapitalize or resolve banks, if necessary.”

At that stage, there were examples from other countries with bank resolution processes in place that Nicosia could have turned to. It didn’t. In fact, former President Dimitris Christofias and his government appeared to become paralyzed after the fatal explosion at a naval base next to the Zygi power station in July 2011, which knocked another 2-billion-euro hole in the country’s economy. Christofias seemed satisfied with securing a 2.5-billion-euro loan from Russia in December 2011 and overlooked the pressing economic problems his country was facing.

It should be pointed out, though, that at that point there were few predictions of imminent economic disaster for Cyprus. In fact, the IMF was upbeat on the country’s prospects in November 2011, forecasting abalanced budget by 2014.

It would be wrong to give the impression, as some have tried to, that Cyprus was never willing to cooperate with the EU and IMF. Over the last few months, there was a growing realization among the island’s decision-makers that time for a solution was running out. In November last year, Anastasiades wrote to President Christofias to complain of delays in reaching an agreement with the troika and warned that one of Cyprus’s banks would need to be recapitalized by January or face losing access to ECB liquidity.
Before the end of November, though, Christofias had agreed a bailout with the troika four months after requesting assistance from the EU and IMF. Try as he might to hold out hope of more help from Russia and to avoid being the one who would invite the troika to Cyprus, Christofias acquiesced just a few months before his presidency came to an end. Anastasiades, the leading presidential candidate, was openly talking about agreeing a memorandum with the troika that would include a package of austerity measures. At that point, there was no official discussion of a deposit levy.

Where Anastasiades got it woefully wrong though was in being unprepared for what the troika might throw at him. His initial decision this month to accept a deposit tax for all bank customers in Cyprus was catastrophic. Having returned to Nicosia with the agreement, he realized his mistake and Cyprus embarked on a week of pointless domestic bargaining and futile overtures to Russia in a bid to raise revenues from alternative sources. Rejecting the deal on the table or not pulling out all the stops to design a better one only made sense if Cyprus had other, concrete options rather than nebulous ideas. The Europeans had done their homework and knew Russia would not come to the rescue; the Cypriots, though, were caught napping.

A series of mistakes, miscalculations and blinkeredness have cost Cyprus dearly but it was aided and abetted by lenders with a penchant for procrastination and internal disagreement. In this environment, both sides were lulled into ignoring imminent threats as they busily kicked the can down the road.

It is only in the last few months that any great urgency was injected into proceedings and it had only been two weeks since Anastasiades was made president when he was confronted by the “deposit tax or euro exit” choice at the Eurogroup. Decision makers within the eurozone will liken the way they confronted Cyprus to an intervention for an alcoholic refusing to accept to his addiction. Anastasiades, however, had already shown a willingness to cooperate and won an election saying he would do so – not a popular policy platform in a Southern European country. The March 15 Eurogroup should be called what it was: an ambush.

It went beyond steering a eurozone partner toward a particular path. Cyprus was given no other option than to accept a solution that would decimate its economy and supposedly reduce its banking sector to the EU average of 3.5 times GDP. The idea itself that Cyprus’s financial sector had to be equal to the EU average betrayed something more than just an attempt to tidy up its economy. Why the EU average and not four or five times GDP? The target smacks of an attempt to put Cyprus in its place, just as the persistent talk of Russian money being laundered in the Cypriot banking system – as if it was not being used for anything else – also appeared a choreographed attempt to undermine Cyprus, which had joined the euro in 2008 with pretty much the same banking system and no complaints.

Over the past few weeks, Cyprus found itself negotiating with the same eurozone whose leaders nine months earlier had affirmed “that it is imperative to break the vicious circle between banks and sovereigns” and who had drawn up plans for euro-area banks to be recapitalized via the European Stability Mechanism (ESM). It was also the same eurozone that just three months earlier had agreed to plans to create a Single Supervisory Mechanism, which would pave the way for ESM recaps. And to think that Cyprus was the one being criticized for its inconsistency.

More damaging than this, though, is the manner in which the Cypriot problem was tackled over the past few days. It showed complete ignorance or indifference regarding the vulnerable position in which a euro member state found itself. Cyprus has borne the cost of having enemies for many years, so being ambushed by its friends can only be distressing.

The eurozone had no qualms about pushing to the edge its only member to be involved in a war in the last 50 years, to have part of its territory occupied by a foreign army, to be still suffering the effect of an intercommunal divide and to have a capital in which passports must be shown to pass from one side to the other.

It is in this environment that Cyprus, a semi-arid island that is surrounded by competing states, must survive. It has taken years for Nicosia to negotiate agreements that would allow it access to the island’s natural resources, but even now Turkey is threatening a “new crisis” if Cyprus seeks to collateralize future gas revenues before there is a settlement on the island.

It is these challenges and the hope of being able to gain a security and stability dividend that brought Cyprus to the eurozone. For all its failings, it did not deserve the treatment it got. With some horror, Cyprus has now realized that the euro area’s interpretation of its central tenet of convergence has become warped. It is not the compact structure many had envisioned. The fissures are now clear.

Ignoring the failure of banks all over Europe over the past few years and the fact that finance was one of the few activities Cyprus could turn to after the Turkish invasion in 1974, French Finance Minister Pierre Moscovici refers to the country’s “casino” banking system.

These double standards are not confined to the eurozone.

"In principle they have only the finance sector and beaches to offer and now the banks are on their way to closure,” said Swedish Finance Minister Anders Borg of Cyprus last week.

Apart from the prejudice implied in Borg’s comment, there is also a failure to recognize history and the strict limits within which Cyprus can operate as a euro member. Sweden went through its own banking crisis triggered by a property bubble in 1991 and 1992 but recovered from it due to a multi-pronged approach that included a state guarantee for all deposits, the government assuming banks’ toxic assets and the nationalization of two key lenders. These options were not available to Cyprus because of single currency regulations and the narrow remit within which the European Central Bank operates.

An EU and a eurozone that forget or ignore even their recent history are becoming a less inviting place to be. The part of Europe that is in a relatively healthy state at the moment seems keen to set aside the past now that another part of the continent is being severely tested. German Finance Minister Wolfgang Schaeuble says the problem lies with the laggards. They are like jealous schoolchildren, he says. However, the immaturity, complete with playground bullying, seems to lie elsewhere.

The tremulous description of the March 15-16 Eurogroup meeting provided by Maltese Finance Minister Edward Scicluna underlined that Europe’s weaker or more vulnerable states feel powerless next to their more successful partners. Hopes of fairness, understanding and solidarity are evaporating.

"Cyprus, more than all the others, holds a special place not so much with regard to the unique factors which brought about the financial crisis... but as a case study of how an EU micro-Mediterranean island member state is expected to be treated if ever its unfortunate turn would come to seek aid from its fellow member states,” wrote Scicluna in an op-ed after the meeting of eurozone finance ministers.

While the last few days have uncovered an alarming propensity for Cyprus to shoot itself in the foot, they have also revealed that the EU, and the eurozone in particular, seems bent on self-destruction. There can be little doubt that the last week will have planted the idea in many minds across Europe, including Cyprus, that going it alone is a better option than being a second-class member of an exclusive club. This may end up being the most damaging wound inflicted during the eurozone’s omnishambles moment.

[Kathimerini English Edition]







Omnishambles.... a new word introduced into the lexicon








http://www.zerohedge.com/news/2013-03-27/cyrpus-contagion-spreads-european-omnishambles-return-euro-under-128-first-time-nove


Cyprus Contagion Spreads As European "Omnishambles" Return; Euro Under 1.28 For First Time Since November

Tyler Durden's picture




While everyone likes to hate on Cyprus, it isItaly that is the focal point of today's European "omnishambles" that has seen the EURUSD tumble to a five month low as of this writing. First it was economic data that scared investors, with Industrial Sales and Orders tumbling far below expected, posting numbers of -1.3% and -1.4%, respectively, on expectations of an increase. Retail sales were just as ugly, declining by -0.5% in January, on expectations of an unchanged print, with the December 0.2% number revised also into negative territory.
Then Bersani, who has been tasked to form a government until tomorrow, said that the possibility of a broad coalition government does not exist, adding that no lasting government is possible without him as a premier, and requesting that Grillo's Five Star party not block his path to government, for which we wish him the best of luck as moments later Five Star ruled out all external support for a broad government and would vote no confidence for Bersani.
Then we got news that the Italian financial police has searched the Nomura in Milan in connection with the Monte Pasci case, which means even more skeletons in the closet are about to be uncovered. Finally, Italy just held a 3.5% 5 and 4.5% 10 year bond auction in which the country raised less than the maximum targeted €7 billion, and in which the Bid to Cover on the 5 Year dumping to the lowest since 2002, with bidding quite soft and the yield rising to 3.65% versus 3.59% previously. This has resulted in a blow out in Italian yields by 16 bps to 4.73% compared to 4.705% earlier.
Not helping matters was Euroarea March Economic Confidence which dropped from 91.1 to 90, missing expectations of a modest dip to 90.5, with declines seen in the Services, Retail, Construction and Business categories, and only Consumer rising modestly. The recent Cyprus risk flare out should put an end to that.
As for Slovenian bond yields, especially the 4.375% of 2021, one word: whoooooosh.
End result, as noted yesterday, has been an acceleration in the rush out of the EUR, with the EURUSD sliding to under 1.28 for the first time since November 21, a blow out in Greek bonds with yields pushing up 55 bps to 12.68% and a push for real safety (sorry, not the DJIA) in the form of German 2 Year bonds, which have dipped to -0.018%, the lowest since December, on rising fears that despite endless lies out of its bureaucrats, Europe may not be fixed after all.
Keep a close eye on Cyprus where as of right now, banks are still set to reopen tomorrow, and where moments ago the Central Bank demanded the resignations of both Laiki and Bank of Cyprus bank boards. Hardly a stamp of trust and approval 24 hours before the bank run begins.
In terms of broad activity, here is SocGen's overnight take:
The broad equity market complex tentatively moved on yesterday from the Cyprus bailout with the USD following risk assets higher despite two disappointing US economic reports, one on consumer confidence and the other on new home sales. There was some reprieve in the confidence data in that labour market conditions, and thus employment growth, are holding up. This should reinforce the positive momentum as we head into Q2, but it remains too soon for the Fed to take its foot off the accelerator. To this end, markets will be listening attentively to what Fed members Rosengren, Pianalto and Kocherlakota have to say.
US pending home sales come out today, while the focus in Europe will be on the Italian bond auctions (2018/2023) and the monthly confidence reports from the EC. The latter are set to highlight a possible worsening in economic conditions as we head towards the end of Q1, with the Cyprus bailout and ramifications for the European bank resolution framework i.e. bail-ins, possibly causing a further dent in household confidence in early Q2. A raft of Italian data is due, but the focus will be on Bersani's report to president Napolitano on his latest government talks. As discussed yesterday in ‘SEK: a double whammy', SEK bulls could be strengthening their grip on EUR/SEK which may cause a return to the February lows below 8.30 in the event of strong confidence data.
‘The last leg of the US assets rally' was released yesterday and discusses SG's latest Cross Asset strategy. It features seven key calls for the 3-12 month investor horizon with portfolio recommendations primarily based around the Fed mulling exit strategies as the US economy recovers, a China slowdown and a dovish BoE.
Finally, here is the traditional recap from DB's Jim Reid: 
A day after sending markets into a spin Eurogroup President Dijsselbloem reiterated that “risks (of bank failures) should fall on those who take the risks, and not the taxpayer”. Interestingly, Mr Dijsselbloem said that he didn’t regret his comments earlier in the week and that Cyprus “does fit into the new approach towards bank rescues that is gradually evolving” (WSJ). Officials at the ECB seem to hold a slightly different view though with Beniot Coeure from the ECB’s executive board commenting that he thought Mr Dijsselbloem was “wrong to say what he said”. Those comments were echoed by Ewald Nowotny who stated that Cyprus is special case and is "no model for other instances".
In Italy, media reports suggest that the centre-left’s Bersani will meet with party leaders from the 5-Star Movement today, as part of his negotiations with major political parties to form a government. Bersani will report the results of his talks to President Napolitano later today or tomorrow. As far as current progress is concerned though, hopes of a working coalition with the centre-right’s PDL look bleak. PDL party secretary, Angelino Alfano told reporters after a meeting with Bersani yesterday that "our positions are still very distant from each other, and if they remain distant in the next 48 hours we will affirm that the only way is to go back to vote". So it looks like we will be hearing more on this in the next day or two.
Turning to Asia, the situation on the Korean peninsula remains a focus with the WSJ reporting that North Korea has ordered the country’s rocket and artillery units to be on highest alert to strike bases in the US mainland, Guam, Hawaii, and other targets in the Pacific and South Korea. The article says that the move comes after the US and South Korea signed a military contingency plan to respond to potential attacks from North Korea. South Korea earlier raised its alert level near the demilitarised border zone but that alert has been lifted as we go to print. For the time being, the news has had a muted impact on the KOSPI (+0.4%) and the Korean Won (-0.5%) but a number of Korean defense stocks are up 5 to 10% overnight.
Elsewhere in Asia equities are trading higher across the region on the back of the S&P500’s solid gain yesterday. There has been little news flow in the region outside of Korea. After a bout of risk aversion over the last week, USDJPY has resumed its climb and is trading 0.3% higher this morning at 94.75. Regional credit markets are 1-2bp firmer this morning while 10yr UST yields remain steady at 1.91%.
In terms of the day ahead, the Eurozone’s economic sentiment survey for March, Italian industrial orders and retail sales are the main data releases in the euro area. Italy will also auction 5yr and 10yr bonds. In the UK, the Bank of England’s Financial Policy Committee is due to publish a report on the capital levels of UK banks. Across the pond, US pending home sales for February will be the main focus. Several members from the Fed are scheduled to speak today including the Boston Fed’s Rosengren, the Cleveland Fed’s Pianalto and the Minneapolis Fed’s Kocherlakota.



And the view from Cyprus.....


http://www.cyprus-mail.com/boc/rush-quell-panic-over-boc/20130327


Rush to quell panic over BoC

By Stefanos EvripidouPublished on March 27, 2013
A distraught bank employee at the demo yesterday (CNA)
THE GOVERNMENT yesterday ran to put out the fire it accused the Central Bank of starting over the future of the Bank of Cyprus (BoC), highlighting the growing rift between the presidential palace and the CB governor.
A short Central Bank announcement on the appointment of a special administrator for the BoC yesterday morning sparked all-out panic among Bank of Cyprus employees that the island’s largest lender awaited the same fate as Laiki (Popular) Bank - a wind down.
Within hours, hundreds of distraught BoC employees gathered outside the Bank of Cyprus’ headquarters in Nicosia before moving their demonstration to the neighbouring Central Bank building, shouting for the resignation of CB governor Panicos Demetriades.
Finance Minister Michalis Sarris rushed to the Central Bank to bang out a short announcement clarifying that the Bank of Cyprus would undergo restructuring and internal recapitalisation, converting big depositors’ savings into shares.
As a result of this process, the European Central Bank (ECB) was committed to provide liquidity for BoC so the bank’s liquidity will not be affected by the transfer of Laiki’s effective debt to the ECB, amounting to €9.2 billion sucked out of the Emergency Liquidity Assistance (ELA) programme to keep Laiki afloat. 
Government spokesman Christos Stylianides said the confusion created in the morning by the CB’s failure to clarify the difference between the winding down of Laiki and the restructuring of the BoC was a “big mistake”.
“Unfortunately, there were communication errors. A Central Bank temporary order was issued effectively marrying winding down and restructuring as if they were the same thing. This issue was not properly explained and created panic not only among BoC employees but also the wider public,” said Stylianides.
He noted that it also created problems with the bank’s international partners, inevitably causing problems to its prestige and prospects.
“The government would have liked to see a clarification in the CB statement on appointing a special administrator (for BoC) so we wouldn’t have to see what happened as a result,” said the spokesman.
Later in the day, Demetriades and Sarris held a joint press conference to bring the point home that the Bank of Cyprus would not suffer the same fate as Laiki.
Seeking to justify the apparent lack of coordination between the CB and the government, Demetriades said people were working under immense pressure until the early morning hours in a bid to complete the procedures.
“Coordination between the authorities becomes a bit more difficult under such conditions,” the governor said, adding that that efforts were being made to do everything in two days.
With chants for his resignation heard from the angry crowd of BoC employees below, Demetriades told a packed room of reporters that the rescue deal for BoC, which will merge with part of Laiki, will produce a “very strong bank”.
The attempt to show a united front by the government and supervisory authority to calm jittery employees and deposit-holders comes not only after the government chastised the governor for his laconic early morning announcement, but also following mixed messages on when the banks will finally open again.
According to sources, President Nicos Anastasiades postponed his address to the nation at least three times on Monday after learning that the CB governor had announced that the banks- excluding BoC and Laiki- would open yesterday and without any capital controls imposed.
Anastasiades and Demetriades clearly have different views on whether the banking system would survive without capital controls.
Sources told the Cyprus Mail that the CB governor was keen to get the banks open as soon as possible, believing all other banks not undergoing a wind down or restructuring did not need capital controls.
Hence, the CB announcement on Monday that those other banks would open yesterday. Anastasiades had a different view, preferring controls at least for the first few weeks.
On the same day, and just a few minutes to midnight, a second announcement was released saying all banks would remain closed yesterday and today.
Demetriades confirmed as much yesterday saying the initial plan to open the smaller banks yesterday  would not have included capital controls.
However, since their opening date was pushed back two days, this changed the situation and the level of trust in the banking system, resulting in the need to impose “temporary” and “loose” capital controls on all banks on the island, said the governor.
All banks have been closed since March 15. Both Sarris and Demetriades said yesterday that everything was being done to prepare for the opening of the banks tomorrow though neither could guarantee for sure that they would.
Sources said Anastasiades was “furious” with Demetriades over his unilateral decision to open the ‘untroubled’ banks two days earlier than the other banks and without capital controls.
When asked to confirm reports that the governor does not have the confidence of the president, Stylianides dodged the question, saying instead: “The institutions, particularly in such difficult times, have to operate in a way that serves the common good.”
Asked later whether consultations between the governor and government were problematic, he replied: “Yes, when you have such errors in coordination then you have a problem that you have to deal with.”
According to sources, the government has considered removing Demetriades from office but has reached a stumbling block over provisions within the constitution.
Defending his handling of the crisis, Demetriades said that from the day he took office, he warned the previous government that Laiki was facing a serious risk of collapse and pushed the Demetris Christofias administration to apply for an EU bailout as soon as possible.
Asked why he did not order its winding down, the CB governor – a Christofias appointee - argued that the legislation was not in place at the time, meaning the only option was liquidation which would have led to bankruptcy of the bank and state.
Following parliament’s approval of the resolution and recovery bill last week, the instruments are in place to protect insured depositors and restructure both of the island’s biggest banks, he said.
Asked whether he would consider resigning following the government’s failure to provide comforting words of support for him, Demetriades said this was not the time for bravado, and expressed pride in the fact that the ECB has trust in him.
He also defended the ECB’s decision to keep Laiki on a “respirator” for many months, allowing Cyprus to hold elections and bring in a new government that would be willing to reach a bailout agreement. 

http://www.cyprus-mail.com/bailout/house-wants-list-those-who-transferred-money-out-march-15/20130327

House wants list of those who transferred money out before March 15

Published on March 27, 2013
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PARLIAMENT yesterday demanded a list of names of people who transferred money out of Cyprus before a March 15 Eurogroup decision to impose a tax on depositors that sparked a crisis that threatens to kill the island’s banking system.
Speaking after a five-hour meeting, the chairman of the House Institutions Committee said they needed more information on the matter.
“An investigation is also needed on whether the government was informed – both the former and the current administrations – about many important issues that, which created the problem in the banking system, especially at Laiki,” Demetris Syllouris said.
The committee will send a letter to the Central Bank governor asking for a list of individuals who had transferred money out of Cyprus before March 15, Syllouris said.
The personal data commissioner said it was up to the governor to decide whether to publish the list but he was obliged to hand it over to parliament.
Attorney-general Petros Clerides agreed that it was up to the governor.
“If the list exists, the authority to decide is the Central Bank governor. The governor should ask two questions: if he has the authority, which he does, and if publication of the list serves public interest,” Clerides told lawmakers.
A letter will also be send to the Laiki Bank administrator, asking for information regarding the branches in Greece.

http://www.cyprus-mail.com/banks/extra-security-laid-when-banks-reopen/20130327

Extra security laid on when banks reopen

By Peter StevensonPublished on March 27, 2013
TOMORROW morning when the banks are due to re-open there will be an extra 180 licensed private security guards making sure there are no outbreaks of violence. According to a member of police, they have also been put on alert to be extra vigilant outside the island’s banks.
Private security firm G4S is responding to extra demand by the banks by posting an extra 180 of its employees both outside and inside branches from tomorrow until order is restored to the banking sector.
“Our purpose, in close co-operation with the police, is to keep order and to help bank employees,” managing director of G4S security solutions John Arghyrou told the Cyprus Mail. The extra security guards who will be posted are current employees who will work some extra days and hours to meet the needs of the bank, Arghyrou said.
He added that his firm was in constant contact with the police and that he believes they have taken the necessary measures to ensure there will be no trouble inside or outside any banks come tomorrow.
“Because of the growing uncertainty over the whole sector and over people’s deposits we have had to increase the amount of security at banks, as understandably, banks want to protect their property,” he said.
As well as offering transportation and protection services G4S also provides a vaulting facility which allows both private and commercial customers to place any amount of cash or valuables in a safe storage facility. “We have had a slight increase recently with current events in the amount of customers using our vaulting facility,” Arghyrou said. He revealed the facility is guarded at all times by armed police.
“We run a big operation on the island, employing 750 people and we have been working round the clock since the banks closed last week,” he added.
The Popular Bank will be taking every possible measure to prevent any disruptions and disturbances at its branches once they re-open. “One of the first things we discussed about our re-opening was people’s reaction and so we have spoken to the police and security firms to ensure order is kept at our branches island-wide,” Popular Bank spokesman Costas Archimandrites said. He added that measures will be purely preventative in the hope that customers will show respect and understanding towards bank employees. “We hope people understand the whole situation is not the employees’ fault and understand that the employees too face an uncertain future,” he said. Police spokesman Andreas Angelides was unable to comment on the situation.


and......





http://openeuropeblog.blogspot.com/2013/03/a-grand-coalition-with-silvio-would-be.html


Tuesday, March 26, 2013


A grand coalition with Silvio is hard to swallow for Bersani, but...

The leader of Italy's centre-left Democratic Party, Pier Luigi Bersani, is in an unenviable position right now. He has been asked by Italian President Giorgio Napolitano to go and meet pretty much everyone (trade unions, employers' associations, political parties) and see if he can get the support he needs to command a majority in Italy's hung Senate. Bersani will report back to Napolitano on Thursday, and is due to meet a delegation from Silvio Berlusconi's PdL party this afternoon.

Berlusconi is playing the hand he has been dealt quite well, taking advantage of Beppe Grillo's refusal to cooperate. Il Cavaliere has already set his conditions for supporting a Bersani-led government: Angelino Alfano (the Secretary General of Berlusconi's party) should be the Deputy Prime Minister, and a man close to the centre-right should be elected as the next Italian President.

Bersani has so far rebuffed Berlusconi's offers, but we have thought of at least three reasons why he may eventually change his mind:
  • Bersani is probably facing a 'once in a lifetime' opportunity to become Italian Prime Minister. He is already 61 (although age is not necessarily an obstacle in Italian politics), and if Italy were to return to the polls he would likely come under huge internal pressure to step down as party leader and give way to someone else. Remember Bersani was at the front of an electoral campaign during which his centre-left alliance squandered a double-digit lead in the polls in about two months. Florence Mayor Matteo Renzi seems to be the most obvious candidate to replace Bersani in case of new elections.
  • More generally, Bersani's own party is already split on this specific issue - with a group of key members close to Renzi not hostile to cooperation with Berlusconi. Reggio Emilia Mayor Graziano Del Rio, for instance, told La Repubblica that if Italian President Giorgio Napolitano were to propose a 'national unity government' (which in Italian political jargon is also known as Governo del Presidente, the President's government), Berlusconi's and Bersani's parties should not be "picky" and should work together for the good of the country. Bersani can't afford to just ignore these voices if he wants to preserve his party's unity in the longer term.   
  • Italy's three largest trade unions - which have close ties with Bersani's party - have explicitly come out against new elections and urged Bersani to form a government "at any cost".
The situation remains extremely fluid, but if cooperation with Berlusconi were the only alternative to re-run elections, these are three reasons why we believe Bersani would at least think twice before sending Italians back to the polls.


And the world from Germany.......

Tuesday, March 26, 2013


No backing down: Germany comes out swinging over claims it is the neighborhood bully


Given all the Germany-bashing over the last week, in the wake of the Cyprus bailout deal (some of it completely ridiculous), it's easy to forget that the Germans themselves are remarkably united over the agreement. In fact, the feeling is that Germany, collectively, just got a fair bit more assertive over its eurozone policy.

On Friday, before a new agreement was finally reached and with Cyprus’ euro membership on the line, German Chancellor Angela Merkel – reportedly in an angry mood - told MPs from her coalition parties that it was wrong for Cyprus to "test" Europe and that while she preferred to see to see Cyprus stay in the single currency but was prepared for an exit.

And with respect to anti-German sentiments, speaking to ZDF this morning, Finance Minister Wolfgang Schäuble bluntly stated that:
“It is always the case, also in the classroom: When you sometimes have better results, the others, who have difficulties, can be a bit jealous.” 
German Justice Minister Sabine Leutheusser-Schnarrenberger (FDP) called on EU leaders to show more solidarity with Germany, claiming that:
"I wish that that the individuals at the highest levels of the EU including the President of the Commission and the President of the Council also display solidarity with us and defend the Germans against unjust accusations".
Meanwhile the opposition SPD and Greens have said they will both vote to approve the deal. It is not just German politicians who are being increasingly assertive. In our daily monitoring of the German press, we've sensed a hardening of tone and rhetoric throughout the crisis, not least in response to the overtly anti-German tone of many of the anti-austerity protests in the south. Referring specifically to the Nazi-themed nature of the protests, Ulrich Clauß argues in Die Welt that:
“In terms of the endemic prevalence of corruption in government and administration and in close to all parties in their respective parliamentary spectrums, these countries rank alongside third-world dictatorships. On the whole we are talking about countries in which ‘good governance’ seems to be an alien concept… in terms of political culture, there is an extreme divide between North and South in Europe.”
Writing in FAZ, Klaus-Dieter Frankenberger argues that:
“The Cypriots like to see themselves as the victims. It is not however their European partners who are responsible for the mess they are in… In the crisis countries many blame their plight less on corrupt elites and bad policies but on the alleged lack of solidarity in the North for which read: neo-hegemonic Germany.”
Last week, following the Cypriot parliament’s rejection of the original bailout agreement,Bild columnist Hugo Müller-Vogg argued in a piece entitled “We’re the scapegoats” that:
“Politicians there have acted extremely irresponsibly. Now they are extremely brazen in their demands from those who have solidly managed their economies. Moreover, they insult those who are supposed to help them. Without German guarantees there would be no bailout fund. But of all things we Germans are being hit in the crisis countries not only criticism but even open hatred… If it was not an issue of Europe’s future, there would only be one appropriate response: deal with your own mess”.
Writing in Die Welt, Director of the Hamburg Institute of International Economics Thomas Straubhaar describes the Cypriot bailout deal as a “turning-point” in the eurozone crisis,arguing that:
“Up until now, the bankrupt countries have been able to use fear of a domino effect to extort Europe. That is now over because the strong eurozone countries have the better hand – and they should not be afraid to play it”.
The implications of a Germany more prepared to assert its viewpoint has huge implications for the future of the eurozone and the EU as a whole. Remember who holds the cheque book...

and....


http://www.spiegel.de/international/europe/german-press-reaction-to-cyprus-bailout-a-891018.html

World from Berlin: Cyprus Chaos 'Doesn't Inspire Hope for EU Future'

Cypriot protesters in Nicosia on Tuesday. Zoom
AFP
Cypriot protesters in Nicosia on Tuesday.
With Cyprus racing to install capital controls before re-opening its banks on Thursday, German media commentators say the island has only itself to blame for its plight. They also warn though that the tough bailout terms are a fresh sign of waning solidarity among euro-zone member states.
Banks in Cyprus will remain closed until Thursday to prevent a run on deposits in the wake of the bailout deal reached on Sunday night that imposes a major levy on big depositors, many of them Russian, and shuts down the second-largest bank, Cyprus Popular, also known as Laiki.
ANZEIGE
Cypriot Finance Minister Michalis Sarris told the BBC that the government was still hammering out details of capital controls on the size and amount of money people will be allowed to withdraw. He said the controls would "probably be a bit stricter" on the two largest banks, Bank of Cyprus and Laiki. He also said people with deposits of more than €100,000 ($129,000) could see about 40 percent of their deposits converted into bank shares.
Meanwhile, even though the banks have been closed since March 16, large amounts of money have been withdrawn from them, according to Reuters. The news agency quoted an EU source saying the Central Bank of Cyprus had requested more banknotes from the European Central Bank than were warranted in terms of the withdrawals it was reporting to the ECB.
The scale of the outflow isn't known. Money has been moved out in various ways. Transfers for trade in humanitarian products, medicines and jet fuel remain allowed, for example. In addition, Laiki and Bank of Cyprus have units in London which remained open throughout last week and they placed no limits on withdrawals, according to Reuters. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia.

Within hours of the bailout being agreed on, the head of the Euro Group of euro zone finance ministers, Jeroen Dijsselbloem, fanned market uncertainty on Monday by saying it would serve as a model for dealing with future euro zone banking crises -- a departure from previous rescues in which taxpayers have had to foot the bill. The comment unsettled investors with assets in larger euro-zone nations and sent share prices and the euro tumbling. Later in the day, Dijsselbloem backtracked and said Cyprus was a special case.
The terms of the bailout have predictably angered Russia, and Germany is once again being vilified for taking a hard line. German media commentators say that while Cyprus brought its problems on itself, the rescue reveals an erosion of solidarity among euro-zone members after three years of crisis. The messy wrangling that preceded the bailout has done lasting damage to the EU, they add.
Conservative Frankfurter Allgemeine Zeitung writes:
"The Cypriots may see themselves as victims, but their European partners aren't to blame for the mess. The case of Cyprus shows how rife alienation and anger are among Europeans: Many in the crisis-hit nations are blaming their plight not on their own corrupt elites or bad governance but on supposedly unsympathetic EU governments, meaning the supposedly neo-hegemonial Germans. The donor countries in turn feel they are the victims of blackmail who are rewarded for their help with insults. At the start of the fourth year of the debt and euro crisis, one can't help but register that trust and empathy have been eroded along the way. It doesn't inspire hope for the future of the EU."
Center-left Süddeutsche Zeitung writes:
"This drastic infringement of property rights was possible due to the unique constellation in Cyprus: Cyprus is the third-smallest country of the European Union, so its political weight isn't very relevant. Cyprus set up a dubious business model that attracted dubious people; they're now being punished, so the burden isn't necessarily hitting the wrong people. The expropriation satisfied the sense of justice of most Germans, and not just them."
"Thirdly, a remarkably poor set of Cypriot politicians refused to see reason for much too long, and in the last week displayed an unpleasant gambling mentality. Anyone who manages in just four days to alienate the entire euro zone, discredit the Euro Group chief, tries to involve Russia in a circumventing maneuver and welds together the German government and opposition in an election year has failed to understand a few basic rules on transparency and policymaking in Europe."
"In this unique combination, Cyprus will remain a unique case. But Europe has changed a lot as a result of this rescue drama. The readiness to show solidarity is eroding by the minute. The euro zone has long since stopped being a brotherhood for increasing prosperity and mutual stability. It has transformed itself into a school of gladiators in which everyone fights for his own advantage and his survival."
Conservative Die Welt writes:
"The solution for Nicosia is no blueprint for dealing with other bank crises. Authorities wouldn't dare to repeat such a procedure in Italy or Spain. If a bank has obtained most of its money from other banks or financial institutions, a radical cut becomes far more complicated because the consequences would eat through the entire financial system. The collapse of Lehman Brothers made this dramatically clear."
"While the international impact of the Cypriot bank restructuring is likely to remain limited, the island nation itself will struggle. Not just rich foreigners but many Cypriot companies will lose a large part of their deposits -- which will inflict major damage on the country's economy."
"The Cypriot compromise is a big experiment. Its outcome will determine how Europe tackles future crises. And whether taxpayers will in future be able to avoid always having to foot the bill for troubled banks."
Left-wing daily Die Tageszeitung writes:
"The case of Cyprus will mean once again that billions of euros will be shifted around. Whenever there's a minor problem, investors in Portugal, Italy or Spain will hurriedly transfer their money to Germany or the Netherlands. They will all try to turn their Spanish or Italian euros into German or Dutch euros. The monetary union may still exist, but it is history nonetheless. Officially we may still have one euro, but in effect we've had 17 different euros for a long time now."
Mass circulation Bild writes:
"The washing machine for illegal Russian money has been switched off! And the Kremlin is fuming. When Cyprus needed savings, Russia didn't lift a finger. Now it's throwing dirt at the rescuers. For Russia's billionaires, Cyprus was a euro colony where they could increase their wealth. It's only fair that they and not the small savers have to pay a high price for rescuing Cyprus."
"Anyone who describes that as theft -- as the Russian prime minister did -- can't be a man of the people. He's a servant of the billionaires. And people who compare the share that the Russians now have to pay with the evil robbery of Jewish assets lack character and know no shame."
Left-wing daily Berliner Zeitung writes:
"The European Union too has been damaged. People will remember the rudeness of the German finance minister, who was more focused on public sentiment in Germany than on the welfare of the community. And the politicians have made one thing clear to all investors and savers inside and outside the currency union: If you invest your money in the euro zone, you take on enormous political risks in addition to economic ones. This loss of confidence will have lasting impact, in the crisis-hit nations and far beyond Europe's borders."
-- David Crossland


Spanish Scandal continues to move forward.......

http://elpais.com/elpais/2013/03/26/inenglish/1364301648_702598.html


Judges' battle over slush fund ledgers inquiry rages on

New arguments cited in fight between magistrates over investigation into PP's illegal activities

The ongoing fight between two High Court judges over who should lead the investigation into the Popular Party's (PP) alleged illegal financing activities continued on Monday, with one of the magistrates giving new reasons as to why he should be the one to probe information contained in leaked party ledgers.
Judge Javier Gómez Bermúdez answered his colleague, Pablo Ruz, that the so-called "Bárcenas papers" - the balance sheets kept by former PP treasurer Luis Bárcenas - fall under his jurisdiction because they contain information that goes beyond the massive Gürtel kickbacks-for-contracts inquiry that Ruz is handling.
The records show bonus payments reportedly made to top PP officials, including Prime Minister Mariano Rajoy, and donations made by businesses, including large construction firms, over an 18-year-period.
On Friday, Ruz said that the investigation should not be separate from his Gürtel inquiry because there are a lot of companies that show up in the ledgers that he is already investigating, and which may have formed part of the alleged kickback schemes at PP regional and local governments. But his colleague on Monday said that there are more companies and other names in those ledgers that have no connection to the case.
"Gürtel could be part of the alleged illegal financing at the Popular Party, but that is not the crime," Gómez Bermúdez wrote. The two judges have been waging a battle through legal motions for jurisdiction in the case.



http://elpais.com/elpais/2013/03/26/inenglish/1364310858_316010.html


High Court names another ex-PP treasurer as suspect in inquiry

Former Popular Alliance (AP) member, Ángel Sanchís, will have to appear before Judge Ruz


The former treasurer for the Popular Alliance (AP) party, Ángel Sanchís. / JOSE HUESCA (EFE)
The High Court on Tuesday announced that it has officially named a third former Popular Party (PP) treasurer as a suspect in its ongoing corruption and tax-fraud investigations, which have already ensnared several members of the ruling party.
Ángel Sanchís, who served as treasurer for the Popular Alliance (AP) party, the PP’s predecessor, will have to appear before Judge Pablo Ruz on April 10.
Anticorruption prosecutors have asked Judge Ruz to subpoena Sanchís after determining that he helped Luis Bárcenas, another former PP treasurer who is the target of a money-laundering and tax-evasion investigation, help launder and conceal some 38 million euros in Swiss bank accounts.
Álvaro Lapuerta, Bárcenas’ immediate predecessor, who served as treasurer from 1987 to 2008, has also been named as a target by anticorruption prosecutors in a related inquiry regarding a slush fund that may have been used to pay top PP officials bonuses on top of their regular salaries. The inquiry stems from a series of balance sheets that record the extra pay bonuses as well as donations from private sector officials covering an 18-year period in which both Lapuerta and Bárcenas served as treasurers.
Bárcenas stepped down as treasurer in 2010 when he was indicted in the Gürtel kickbacks-for-contracts investigation, which is being conducted by Ruz.
According to the judge’s order, Sanchís “contacted managers” of Bárcenas’ accounts in Switzerland, “cooperating in the concealment of these accounts of funds that allegedly came from illicit activities.”
Iván Yáñez testified earlier this month before the High Court that he served as a front man for Bárcenas. Ruz said that there are indications that Sanchís was also involved after reviewing evidence from information on money transfers to the United States.

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